ESCP EUROPE MEB 2010/2011

1. THE ORIGIN, THE STRUCTURE AND THE REPRESENTATIVENESS OF THE LOBBY
BP Plc is one of the leading international oil and gas companies, based in London. BP interest in Europe is strong in terms of market, exploration (especially in the North Sea and Russia) and refining (7 refineries in Europe and chemical plants). Its business includes three main areas:  Upstream: finding, producing and transporting oil and gas;  Refining and marketing of oil and petroleum products;  BP alternative energy, including biofuels, wind, solar and carbon capture and storage. BP was the first oil and gas company registered as a lobbying group since November 2008 in the European Commissions’ voluntary register of interest representatives. It is also part of the register of interest representatives of the European Parliament. However, BP Plc presence as an interest group in European Institutions is earlier, especially since 1975, due to the rise of European regulation for oil refining and trade. BP influence has been increasing linked with European policies related to environmental issues (e.g. European Commission’s Energy and Climate Change Policy), reaching also new businesses where legislation has to be fully developed (e.g. biofuels). Moreover, BP has a strong lobbying experience due to its presence in the USA. Some lobbying procedures are included as part of the CSR policy of BP, e.g. it is explicitly prohibited taking actions that could mislead an investigator or regulatory official. Pertaining the structure, BP counts with a permanent office in Brussels (with more than 20 employees, according to activists’ websites). Two BP lobbyists are accredited to the European Parliament (Olivera Drazic and Gunnar Jungk), i.e. they can access and inform MEPs in relation of their activity in the Parliament. Moreover, the contact person for the lobby is the Director of European Government Affairs of BP Europe, showing that BP counts with a strong internal structure to support their lobbying activities. Some sources report that other lobbying practices are exerted by BP. These practices would require a more subtle structure and resources. Revolving door seems to be a common practice (executives and chairmen of BP that participate inside institutions and vice versa). BP lobbying activities for European institutions are also implemented through its influence at a national level, especially in United Kingdom. Also, BP is member of 10 associations of the energy sector and think-tanks. BP used to be part of a lobby group that questioned the climate change and the greenhouse effect (Global Climate Coalition, GCC), but it left the group in 1997, positioning itself as a collaborator of public institutions in order to develop and implement climate change policies. E.g. EUROPIA (European Petroleum Industry Association) focuses on influence the European Parliament and Commission representing the refining and marketing sector of oil and gas industry. In fact, disclosed estimated costs of lobbying in EU institutions (400,000-450,000 € in 2009) only correspond to this direct influence actions and therefore they are much lower than the costs disclosed

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by BP in the US (nearly $16m on lobbying the federal government in 2009, because it includes third parties costs, as public relations agencies, e.g. Rond-Point Schuman, Brunswick Group, GPlus). BP representativeness is focused on its private economic interests. The main activity of this lobby is related to lobbying function (influencing decision-making from outside), but also to the decisionmaking function (influencing from inside). BP top executives are invited to take part in roundtables (e.g. European Roundtable of Industrialist) or advisory groups on their own behalf, without representing the company or the sector (e.g. for competitiveness issues). 1.1 Lobbying through trade Associations

BP belongs to 10 trade associations like the ERT and EUROPIA. ERT brings together the senior board members of large EU organizations and acts as a direct contact between the companies and the EU commissions and the member state governments. The European Petroleum Industry Association (EUROPIA) represents the European downstream oil industry, presenting common positions on issues which affect the industry to EU institutions. EUROPIA is the united front which shapes Commission policy on behalf of BP and its peers. The Commission frequently consults with EUROPIA as well as with individual oil companies.

2. THE BP LOBBY’S MISSION, GOALS AND ISSUES
The EU is the second-largest energy consumer in the world, a vast geographical area with common standards for both products and business practices. Not only the second largest energy market, but also a market with common standard in terms of energy legislations. The EU legislators then represent a relevant stakeholder as it provides environmental measures which could affect the industry, in terms of the Emissions Trading Scheme (ETS). Some of the BP main areas of interest for lobbying (as stated in its website) are carbon pricing, lowcarbon fuels, natural gas and carbon capture and storage on a large scale. Two main axis of interest are: - European policy and legislation, in fields like energy, environmental issues, research and technology, competition (especially relevant due to the mergers and acquisition in the energy sector), taxation, transport, internal market or employment. - European international relations, with regions related to BP business (external relations, external trade, foreign and security policy, etc.). The primary objective of BP lobby staff is to maintain BP’s relationship with the European Commission. BP’s strategy is based on the will of obtaining a certain benefit from the effects of scale that European energy market could assure. Even if BP works to avoid rigorous and binding legislation which might increase its costs or impact on profits, it tries to strengthen the confidence between itself and the legislators in order to be perceived as a good self-regulator.

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EU legislators are increasingly extending their powers over the oil industry. The refining and sale of oil has become increasingly regulated at the EU level and the companies are being affected by the Emissions Trading Scheme. BP is trying to lobby against this increase in regulations and legislations, especially in areas where it directly affects their profits. With EU’s connections and trade policies with the rest of the world, BP would like to get a favorable treatment by the countries where it has assets as lobbied by the EU commissioners. The targeted institutions are mainly the EU Commission and the member state governments. Also, through the EU, since it wields so much power over it, it tries to influence the states such as Russia and China where it has a lot of assets.

3. LOBBYING METHODS
3.1.Direct participation in EU policy making Many of the BP staff, past and present have been concurrently involved in high positions in the EU with decision making powers. This is the most superfluous and the direct way of lobbying employed by BP, and also the most visible one. Examples:  Between 2006 and 2008, Iain Conn, BP’s chief executive of refining and marketing sat alongside Commissioners and members of the Council on the Commission’s High Level Group (HLG) on Competitiveness, Energy and the Environment.  BP chairman Peter Sutherland served as Competition Commissioner under Jaques Delors and was appointed in 2007 as the President’s adviser on energy and climate change, giving him unparalleled access to Commissioners and MEPs.  Former BP Chief Executive David Simon stepped down from BP to take up a position as the UK’s Minister for Trade and Competitiveness in Europe.

3.2

Third Party Lobbyists like Trade Associations and Think Tanks

This strategy of lobbying is adopted when there is a specific proposal from the Commission. When threatened by EU proposals on new regulations, it will act initially for example through the European Petroleum Industry Association (EUROPIA), or the European Chemical Industry Council (CEFIC). In this way, it is able to preserve the brand as well as keep itself distanced from the direct activities. What it ensures is that there is no possibility of it being accused of political interference due the dual role played by its executives. 3.3 BP’s own registered lobbyists

Three executives from BP are officially registered in the European Parliament’s register of lobbyists and are in regular contact with the commission regarding various issues.

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3.4

Issuing Public statements

This technique is used as the last resort as the company avoids going to public frequently. It is used only after ensuring all the other lobbying methods have been fully exhausted. All of the above methods represent a hierarchy in the sense that they represent a certain risk of exposure and esteem erosion associated with them. If their top most executives are going into the damage control most of the times, it becomes visible for others to see what is wrong and draw conclusions out of it. So as far as possible they try to be really discreet and avoid using tactic that could draw unnecessary attention towards them.

4. CONCRETE EXAMPLES OF THE RESULTS ACHIEVED
4.1 BP and Russia BP is the largest foreign investor in Russia. At the same time, the EU is dependent on Russian gas which was particularly noticeable at the beginning of 2009 when gas supplies through Ukraine were cut short. Russia has the world’s largest natural gas reserves and is responsible for 40 % of the EU’s gas imports. BP’s successful lobbying work shows how the company has come under pressure from the Russian state and has asked for and obtained EU support in the matter. BP’s work in Russia has received EU backing due to the perception that the EU and the oil company share the same objectives. These perceived mutual interests give a good insight into the success of BP’s lobbying work in Brussels. 4.2 Fuel Quality Directive (FQD) Another example of BP’s lobbying work comes in the form of the FQD. The idea of the directive was to set EU-wide standards for petrol, diesel and gas-oil used in all sorts of vehicles in order to protect human health and the environment. It was the Commissions aim to help fight global warming by supporting the development of lower carbon fuels (i.e. biofuels) and by meeting air-quality objectives. Moreover, the Commission proposed compulsory reporting of lifecycle greenhouse emissions from fuels, and an obligation for oil companies to make sure that greenhouse gases produced by their fuels are reduced. BP lobbied for unlimited access to disputed biofuel imports without any consensus on sustainability standards for how and where this kind of fuel is to be produced. 4.3 The Emissions Trading Scheme (ETS) Concerning EU environmental guidelines, BP lobbies to avoid legislation which might increase the company’s costs or have a negative impact on its profits. The ETS is one example where BP has worked to develop a concept which fails to produce cuts in greenhouse gas emissions, while diverting attention from measures on climate change as outlined in the Kyoto Protocol. In 2008 the European Petroleum Industry Association warned the Commission that the actions it was about to take against greenhouse gas emissions could weaken the competitiveness of the European oil industry. BP and 5

other oil companies disagreed with suggestions to force refineries to pay for emissions permits. Due to BP’s lobby, what was originally conceived as a means to meet the EU’s Kyoto obligations, turned out as a plan to cut the cost of climate change policies. The plan did not bring about a reduction in emissions.

5. THE BP’S RELEVANCE IN THE EUROPEAN PROCESS
BP is one of the world’s leading oil companies, and one of the largest corporations in the world. In Europe, BP has a visible presence in most EU member countries, with a network of service stations across Europe as well as franchise-operated service stations which bear the BP brand. Europe accounts for 43 per cent of BP’s total marketing sales and 36 per cent of BP’s refining capacity, reflecting how much the company has on stake in its interface with EU institutions and legislation. The high status held by the company and the impact it would have on economy and employment has provided it with a strong lever for its lobbying purposes. BP has had strong influences on the European policy and legislations, particularly aiming at those impacting the business of the company including areas of energy, climate change, environmental protection, competition, financial markets and employment. BP’ s lobby aim to avoid any form of regulations that could impact its profit or business; when these regulations cannot be avoided, BP try to attenuate the impact of those regulations and assure maximum flexibility for itself. For example, in the case of the European Emissions Trading Scheme (ETS) the company has deliberately worked to shape a scheme which fails to deliver cuts in greenhouse gas emissions, while successfully diverting attention from meaningful action on climate change. On the Fuel Quality Directive (FQD) BP has been pressing for unlimited access to controversial agrofuel (biofuel) imports without any agreement on sustainability criteria for how and where agrofuels may be produced. BP also benefits from EU foreign and trade policies, in which it proves to be a support for BP around the world. The EU is a major trading partner with the USA, Russia and China, where BP has substantial assets. When EU Commissioners meet with diplomats from foreign governments to advocate treatment of European corporations, these demands represent far greater leverage than BP could provide by itself. When BP’s efforts to influence the EU’s legislative agenda falter, the company turns to third party lobbyists, through trade associations and think tanks. When the company perceives that its interests are threatened by new EU regulations it will act initially for example through the European Petroleum Industry Association (EUROPIA), or the European Chemical Industry Council (CEFIC). By operating through these industry clubs, the company can influence legislative outcomes, while maintaining a distance between the BP brand and damaging accusations of political interference.